How a Child Tax Credit Can Improve Children’s Health

More than one in seven Illinois children or approximately 425,000 Illinois children lived in poverty in 2022. Of that number, just over 218,000 children (or 8% of all Illinois children) lived in households with incomes less than half of the federal poverty level or what is termed extreme poverty.[i] (In 2022, a 50% poverty threshold for a family of two adults and two children was $14,839.) Within that number, 22% of Illinois Black Children were in extreme poverty compared to 4% of white/non-Latinx children.[ii]

Using the U.S. Census Bureau’s Supplemental Poverty Rate, which takes into account benefits such as nutritional assistance and subsidized housing as well as taxes and other expenses for work, medical care, clothing shelter and utilities, 2022 numbers show an estimated 381,000 Illinois children in poverty.

Child poverty can impact a child’s health well into adulthood. In 2015, Congress directed the National Academies of Sciences, Engineering, and Medicine to conduct a comprehensive study of child poverty in the United States.[iii] The group assembled by the National Academies found overwhelming evidence that a child growing up in poverty experienced worse outcomes than a child from a wealthier family with respect physical and mental health, educational attainment, labor market success, and risky behaviors. The reasons may be with respect to the inability to make direct investments (or the purchase of goods and services that include food and housing) by parents as well as stress brought on by poverty for both a parent and child.[iv]

Source: National Academies of Sciences, Engineering, and Medicine

Past studies on children growing up in poverty have shown:

  • Income has a significant relationship to birth-weight. The lower the household income level the higher the correlation to low-birth weight.[v] Babies born with a low-birth weight are at increased risk of dying in the first year of life.[vi]
  • Poverty impacts a child’s brain development. In one study, infants, toddlers, and preschoolers from lower income families had lower total gray matter compared with those from middle and high-income households by toddlerhood.[vii]
  • Growing up in poverty can cause toxic stress – or prolonged and severe exposure to stress- in a child. Toxic stress can disrupt the development of the brain.[viii] In addition, toxic stress (and its interaction with other factors such as air pollution) can result in cognitive deficits and emotional disorders in children.[ix]

Family Povety Affects on the Rate of Human Infant Brain Growth
SES= socioeconomic status

Source: doi: 10.1371/journal.pone.0080954.g002

 

Yet, economic supports can help tackle poverty and prevent such risks.

Action by the federal government to increase the federal Child Tax Credit in 2021[x], along with other family economic supports, helped reduce child poverty in the United States by nearly half.[xi] Unfortunately, the enhanced credit, and its impact, lasted for only one year.

Recognizing the important role such supports can play in a child’s development, fourteen states have now have enacted some form of a Child Tax Credit. Not only does Illinois not have a state Child Tax Credit but its tax system compounds the circumstances of low-income households.  According to the Institute on Taxation and Economic Policy, the lowest 20% of low-income households in Illinois pay more than twice their share of income in state and local taxes than the top 1%.[xii]

A refundable state Child Tax Credit can help Illinois improve the health of its children and make our state and local tax system more equitable. There is evidence that an economic support, such as a Child Tax Credit, improves children’s health:

Low-Birth Weight

  • A review of states with an Earned Income Tax Credit (EITC) showed state EITCs increased birth weights by, on average 16 gm.[xiii]
  • Another study of four changes to the Washington, D.C. EITC found a pattern of significant improvements across infant outcome measures, with the size of the effect estimate matching the magnitude of the tax credit—ranging from a 1.9 (-2.9, -0.9) reduction in rate per 100 births of low birth weight for a smaller 10% credit, to a 4.7 (-5.4, -4.0) reduction with a 40% credit.[xiv] The study also suggests that D.C.’s tax credit policy prevents an estimated 349 infants per year from being born with low weight.

Brain Development

  • A study published in 2023, documents that in high cost-of-living states providing more generous cash benefits for low-income families socioeconomic disparities in the hippocampal volume (or size of the hippocampus) were reduced by 34%.[xv] While other factors may be in play, researchers found “the patterns were robust to controls for numerous state-level social, economic, and political characteristics”.
  • Another study looking at infant brain activity, with one group of mothers given a nominal monthly unconditional cash gift and another given a large unconditional cash gift, showed infants in the large cash gift group showing more brain activity in high-frequency bands (particularly in frontal and central brain regions) than the group receiving nominal cash gifts.[xvi]

Other factors

  • The expanded federal Child Tax Credit significantly improved food security and healthy eating among those eligible. Compared to ineligible households, CTC-eligible households were:

o 1.3 times more likely to increase fruit consumption.

o 1.5 times more likely to increase meat and protein consumption.

o 1.4 times more likely to report increased ability to afford balanced meals.[xvii]

  • Researchers found that a $1,000 cash transfer to a one-child, single-parent low-income family produced social benefits (including future earnings of children, decreased neonatal mortality, avoided expenditures on child protection and health care costs among others) five times greater than the initial transfer.[xviii]

With racial and ethnic disparities in incomes, and the resulting disparities in children’s health, Illinois can take a major step forward in creating better health outcomes by enacting a refundable state Child Tax Credit. Improved outcomes should also help reduce the need for certain state services that address the negative impacts for poverty on children.

Illinois Governor J. B. Pritzker has proposed a state Child Tax Credit for children under the age of three worth 20% of the taxpayer’s state earned income tax credit. (The total state cost is estimated at $12 million.) However, a current proposal before the Illinois General Assembly would create a more robust $300 per child credit for most families below the state household median income. As the General Assembly heads towards a scheduled May 24th adjournment date, it must make a strong refundable Child Tax Credit part of the approved state budget for the upcoming fiscal year.

Written by Mitch Lifson

Endnotes:

[i] U.S. Census Bureau, American Community Survey

[ii] Annie E. Casey Foundation

[iii] National Academies of Sciences, Engineering, and Medicine. (2019). A Roadmap to Reducing Child Poverty. Washington, DC: The National Academies Press.

[iv] Ibid

[v] Finch, BK. (2003, December). Socioeconomic gradients and low birth-weight: empirical and policy considerations. Health Services Research. 38(6 Pt 2):1819-41. doi: 10.1111/j.1475-6773.2003.00204.x.

[vi] Gupta, R.P., de Wit M.L., McKeown D. (2007, October). The impact of poverty on the current and future health status of children. Pediatric Child Health. 12(8):667-72. doi: 10.1093/pch/12.8.667.

[vii]  Hanson, J.L., Hair, N., Shen. D.G., Shi F,  Gilmore, J.H., Wolfe, B.L., et al. (2015) Family Poverty Affects the Rate of Human Infant Brain Growth. PLoS ONE 10(12): e0146434.

[viii] Harvard University Center on the Developing Child. Toxic Stress. Retrieved at https://developingchild.harvard.edu/science/key-concepts/toxic-stress/

[ix] Columbia University Mailman School of Public Health. (2016, May 16). Unequal Stress: How Poverty is Toxic for Children’s Brains. Retrieved at https://www.publichealth.columbia.edu/news/unequal-stress-how-poverty-toxic-childrens-brains

[x] Congress increased the maximum credit level from $2,000 per child to $3,600 for children under the age of six and $3,000 for children ages 6-17 and  made the full value of the credit available to more low-income families.

[xi] Gould E. (2022, September 22). Child Tax Credit Expansions were Instrumental in Reducing Poverty Rates to Historic Lows in 2021. Retrieved at https://www.epi.org/blog/child-tax-credit-expansions-were-instrumental-in-reducing-poverty-to-historic-lows-in-2021/

[xii] Institute on Taxation and Economic Policy. (2004, January). Who Pays? A Distributional Analysis of the Tax Systems in All 50 States – 7th edition.

[xiii] Strully, K.W., Rehkopf, D.H., Xuan, Z. (2010, August 11). Effects of Prenatal Poverty on Infant Health: State Earned Income Tax Credits and Birth Weight. American Sociological Review ;75(4):534-562.

[xiv] Wagenaar, A.C., Livingston, M.D., Markowitz, S., Komro, K.A. (2019, January 16). Effects of changes in earned income tax credit: Time-series analyses of Washington DC. SSM Population Health;7:100356

[xv] Weissman, D.G., Hatzenbuehler, M.L., Cikara, M. et al. (2023). State-level Macro-economic Factors Moderate the Association of Low Income with Brain Structure and Mental Health in U.S. Children. Nature Communications; 14, 2085

[xvi] Troller-Renfree, S.V., Costanzo, M.A., Duncan, G.J., Magnuson, K., Gennetian, L.A., Yoshikawa, H., Halpern-Meekin, S., Fox, N.A., Noble, K.G. (2022, February 1). The Impact of a Poverty Reduction Intervention on Infant Brain Activity. Proceedings of the National Academy of Sciences of the United States of America;119(5):e2115649119.

[xvii] Hamilton, L., Roll, S., Despard, M., Maag, E., Chun, Y., Brugger, L., Grinstein-Weiss, M. (2022, April). The Impacts of the 2021 Expanded Child Tax Credit on Family Employment, Nutrition, and Financial Well-Being. Brookings Working Paper #173

[xviii] Garfinkle, I., Sariscsany, L., Ananat, E., Collyer, S., Hartley, RP, Wang, B., Wimer, C. (2022, March). The Benefits and Costs of a U.S. Child Allowance. Working Paper 29854, National Bureau of Economic Research

The Proposed Fiscal Year 2025 State Budget

Illinois Governor J.B. Pritzker has proposed a Fiscal Year 2025 (FY25) budget that makes significant investments in education but is also built on gambles in wagering revenues and net losses.

The Governor proposes spending $52.7 billion in General Funds[1] for the upcoming fiscal year that starts July 1, 2024. The largest category of expenditures (20.5%) is for human services, followed by PreK-12 education, and pensions (18.9%).

Source: Governor’s Office of Management and Budget

With revenues higher than forecast when lawmakers passed the FY24 budget for the current fiscal year, he is also asking the legislature to approve a supplemental appropriation of $1.2 billion in General Funds[2]. The major expenditures of those funds include:

  • Increased caseload pressures at the Department of Aging and the Department of Human Services,
  • Outstanding bills to the Department of Innovation and Technology,
  • Increased state group insurance costs, and
  • An amount needed to cover delayed reimbursements by the Federal Emergency Management Agency to the Department of Healthcare and Family Services for COVID-related nursing staff support costs for hospitals.

With the supplemental appropriations, the proposed FY25 expenditures – if approved – would be 1.5% higher than FY24.

The proposed budget is built on anticipated revenues of $52.9 billion.

Source: Governor’s Office of Management and Budget

However, to reach that level, the Governor is proposing a set of revenue enhancement measures that total more than $1.0 billion. These measures include:

  • Reinstating the Corporate Net Operating Loss Deduction for Next Three Years at $500,000 Per Year (Estimated Revenue: $526 million) State law permits a corporation with a net operating loss (NOL) in a given year to carry the loss forward to future years and deduct the amount from the corporation’s income tax liability. In 2021, the state placed an annual NOL cap of $100,000 for claimed losses. That law expires at the end of this year.  The Governor is looking to reinstate the limitation through 2027 but with a cap of $500,000.
  • Capping the Retailer’s Discount at $1,000 per month (Estimated Revenue: $101 million) Illinois law permits retailers to keep 1.75% of the sales tax due on retail sales for administrative costs. With more retailers automating the processing, the Governor proposes a monthly cap of $1,000 per month to reduce the sales tax revenue lost to the state. Prior efforts to cap the discount have faced opposition from the business community and been unsuccessful (Prior to 1990, the discount was 2.1%.) A January 2023 survey by the Federation of Tax Administrators shows 27 states allow a retailer/vendor discount with 19 imposing a cap per report/year/quarter/month. The discounts and cap levels vary. Pennsylvania has a monthly cap of $25. In Michigan, the maximum discount is $20,000 if the taxpayer remits the amount due before the 12th of the month and $15,000 if the taxpayer remits the amount due between the 13th and the 20th of the month. [3]
  • Increasing the sports wagering tax from 15% of adjusted gross sports wagering revenue to 35% (Estimated Revenue: $200 million in General Funds) Sports betting became legal following a 2018 U.S. Supreme Court decision and Illinois approved the Sports Wagering Act in 2019. It is one of 38 states that have legalized sports betting in some fashion.

The Illinois tax applies to adjusted gross sports wagering receipts. Revenue from Illinois’ nine licensees in 2023 totaled $142.3 million. New York has a base tax rate of 51% and Pennsylvania has a base tax rate of 36%.

In a review of the proposal, JMP Securities analyst Jordan Bender wrote that “the effective tax rate increasing in Illinois will hurt smaller operators, and allow larger companies like DraftKings, FanDuel, and BetMGM to gain market share and help offset the tax losses.”[4]|

  •  Transferring $175 million in mass transit costs from sales tax revenue to Road Fund.

If lawmakers decide not to act upon the proposed revenue measures, they will either need to find other revenue sources to pay for proposed expenditures ( whether that is increasing the state income tax rates, expanding the sales tax base, or curtailing existing corporate incentives) or reduce appropriation line items. However, it seems unlikely that the General Assembly would increase the individual income tax rate or significantly expand the sales tax base or rate prior to a general election. CAFC takes a further look at additional revenue needs later in this blog post.

Other tax items

There are two other tax items noted by the Governor in his budget address with one impacting the proposed budget and the other impacting local governments versus the state.

Child Tax Credit
The Governor has proposed a state refundable Child Tax Credit (CTC) for children under the age of 3 in households receiving a state Earned Income Tax Credit. The proposed credit would be worth 20 percent of the state EITC received by a taxpayer and cost the state a total of $12 million annually.

Children’s Advocates for Change is encouraged by the fact that the Governor noted the positive impact the credit can have for families. Studies have shown economic supports, such as a CTC, can improve children’s health, educational attainment, and even future earnings. CAFC (and others) is supporting legislation to create a $300 per child credit for most families below the state household median income. The estimated initial cost to the state for the credit would be approximately $300 million annually.  However, because recipients are likely to be spending most of the credit value on needed goods and services, the state would recoup a portion of the spent credit in sales and income tax revenue.

Furthermore, the 2022 American Community Survey puts the number of Illinois children in poverty at nearly 425,000. The Governor’s proposal, aimed only at children under the age of 3, would only impact approximately 71,400 children. CAFC looks forward to conversations with the Governor’s Office and legislators about creating a robust CTC.

Eliminating the Sales Tax on Groceries
Governor Pritzker is also proposing to eliminate the 1% state sales tax on grocery food items. According to the Governor’s Office, this would account for approximately $325 million. The state distributes that revenue to local governments.

According to the Center on Budget and Policy Priorities, Illinois is one of only a dozen states that as of last fall taxed groceries.[5] The state suspended the tax from July 1, 2022, through June 30, 2023, to help families deal with higher grocery prices during a time of high inflation. In his budget address, the Governor stated:

For the good of our state’s working families, let’s permanently eliminate the grocery tax! It’s one more regressive tax we just don’t need. If it reduces inflation for families from 4% to 3%, even if it only puts a few hundred bucks back in families’ pockets, it’s the right thing to do.

In addition to the state sales tax on groceries, residents within the boundaries of the Regional Transportation Authority or Metro-East Mass Transit District face a local tax on grocery food items. If legislation to eliminate the state sales tax on grocery food items follows the 2022 suspension, it would not impact these local taxes.

The Illinois Municipal League has expressed its opposition to the proposal. Among other communities, it estimates the revenue loss to the City of Chicago could be $60-80 million dollars and $3.8 million for the City of Springfield.

While most facets of state government, from mass transit to additional reimbursements to safety net hospitals, may impact children and families, CAFC has taken a look at some of the major agencies, programs and services that directly serve children and families. During the next several months, CAFC will continue to dig deeper into proposed program funding from the listed line items in the Governor’s budget.

Education

Pre-Kindergarten (PreK)
Last year, the Governor proposed (and with legislative approval the state embarked on) the first of a proposed four-year program called Smart Start. The major focus of Smart Start is to eliminate early childhood care and education deserts for three- and four-year olds by 2027. This includes additional investments in the Early Childhood Block Grant (which funds PreK programs such as Prevention Initiative [for children 0-3 years of age], Preschool for All [for children ages 3-5], and Preschool for All Expansion – the all-day PreK program), Early Intervention Program, Home Visiting, and child care (to increase access and staff salaries).

Source: Office of the Governor

The Governor ‘s proposed FY25 budget calls for a $75 million increase for the Early Childhood Block Grant, which brings the total funding for the Block Grant to $748 million. According to he Governor’s Office of Management and Budget (GOMB), last year’s investment of an additional $75 million created addition of 5,886 new preschool seats in preschool deserts—areas of the state with too few publicly funded preschool seats to serve 80% of low-income 3- and 4-year-olds in the area.[6] This year’s request is designed to create 5,000 additional PreK slots in child care deserts.

One of the recommendations in a 2021 report by the Illinois Commission on Equitable Early Childhood Education and Care Funding was to consolidate early childhood programs into a new agency. Currently, programs impacting early childhood and care are spread across the State Board of Education, Department of Human Services, and Department of Children and Family Services. This proposed budget includes $13 million for the creation of a new Department of Early Childhood to hire initial personnel and build the technical infrastructure to get the agency off the ground. The legislature will need to pass enabling legislation to create the agency. The state would not relocate programs with the State Board and existing departments until 2026.

K-12 Education
In his address before the General Assembly, Governor Pritzker emphasized the importance of maintaining robust public investment in K-12 education. He proposed numerous increases in the State Board of Education’s budget, but some important line items remain flat from last year’s budget.

The overall state K-12 education budget is $10.8 billion, which accounts for approximately 20% of the overall state general revenue budget. The item that sees the biggest dollar increase in the education budget is for Evidence-Based Funding (EBF). Since 2017, this has been the main state funding source for K-12 education in Illinois. For Fiscal Year 2025, the Governor proposes increasing Evidence-Based Funding for K-12 schools by $350 million, bringing the overall Evidence-Based Funding level to $8.6 billion. When revisions occurred to the EBF formula in 2017, the state pledged to add $350 million additional dollars to the formula for each of the next ten years (for a total of $3.5 billion in new dollars) to reduce inequities in school funding across the state and see that every school district reaches an “adequate” level of funding for educating a child.

While this proposal meets the statutory recommendation of the Evidence-Based Funding reform law, it may not meet the current needs of public schools in Illinois. With the effects of normal inflation and the higher-than-normal inflation of the past two years, $350 million in today’s money is no longer worth as much as $350 million in 2017 dollars. The result of this is many districts are not seeing the level of increases needed to reach full, adequate funding. School funding advocates are asking the state to increase the EBF formula by $550 million.[7] CPS is currently facing a projected budget deficit of $391 million. Without increased state investment, CPS will need to fill in its deficit through either spending cuts, which takes much needed resources out of schools, or through local taxes.

The Governor proposed an increase of $789 million for various aspects of special education in Illinois. This is a $30 million increase over the FY24 funding level. The Governor also called for a $10.8 million increase in Career & Technical Education, which would bring the total CTE funding to $58 million.

Not every item in the state education budget proposal saw an increase for FY 25. State funding for After School Programs remains at $35 million, the same as last fiscal year. The Teacher Vacancy Pilot Program, which aims to train and place teachers into low and middle-income school districts, maintains its funding level of $45 million from last year. The state’s Free Breakfast & Lunch reimbursement program also remains at last year’s funding level, $9 million.

Higher Education
The higher education budget sees small increases meant to keep pace with the normal rising of costs. The state’s public universities see a small 2% increase from last year’s funding levels. In total, universities see funding levels rise to $1.3 billion in the proposed FY 25 budget.

Community colleges in Illinois also see a small 3% increase from FY 24 funding levels.

The state’s Monetary Award Program (MAP), which provides tuition support for low- and middle-income college students in Illinois, sees a small $10 million increase in the proposed budget. This brings the total MAP funding for FY 25 to $711 million. This is estimated to provide tuition assistance to 144,000 college students in Illinois.

A promising trend in the last decade is the continuing increase of the maximum available award for MAP grantees. In the 2013-2014 academic year, the effective maximum award amount was $4,720. In the 2023-2024 academic year, that amount is $8,400, a nearly 78% increase.[8] This has led to more purchasing power for MAP grantees. In the 2013-2014 academic year, the maximum MAP grant award covered 37% of tuition and fees for 4-year universities and 44% for 2-year colleges. In 2023-2024, the maximum MAP grant award covers 50% of 4-year university tuition and 61% of 2-year college tuition.[9] By leveling off investments in both MAP grant funding and university funding, the state faces the danger of stalling progress on raising the purchasing power of the MAP grant.

Human Services

Department of Human Services

Child Care
Another component of the Governor’s Smart Start Program is improving access to and the quality of child care in the state. However, the workforce needs to be in place to do that. Among the goals of the Smart Start Program is increasing funding to child care providers to raise wages for workers. The current FY24 budget contains $100 million for Child Care Workforce Compensation contracts (made possible by COVID-19 federal relief funds) to increase the pay of child care workers and stabilize the operations of providers.

The proposed budget contains $122 million for Smart Start investments. Of that total:

  • $110 million in General Funds is for Workforce Grants (with appropriation authority for an additional $40 million in federal funds)
  • $10 million in General Funds is for Quality Support Contracts, which are designed to increase wages based on staff credentials, hire additional staff support, and provide professional staff development[10] and
  • $2 million is for the Early Childhood Apprentice Program, which is designed to connect students in credentialed programs with childcare centers in targeted communities where they receive training and mentoring from personnel.

There is a $36.5 million increase in the Child Care Assistance Program to handle caseload growth. Furthermore, there is additional appropriation authority for anticipated federal funds to help cover caseload growth. A supplemental appropriation request of $30 million is allocated to restore funds for the Child Care Assistance Program that were shifted under executive authority as part of a $160 million package to support services for asylum seekers during the current fiscal year.

The budget also contains $1 million for a low-income diaper program. The budget does not contain details of how the state would administer the program.  Sen. Lakesia Collins has introduced SB 3162 that sets a monthly diaper allowance of $70 for eligible children whose family income is at or below 100% of the federal poverty guidelines.

EI and Home Visiting
The proposed FY25 budget also includes an additional $6 million in General Revenue for the Early Intervention Program and an additional $5 million for the Home Visiting Program (including Parents Too Soon and the Healthy Families Program). The Early Intervention (EI) Program is designed to evaluate infants and toddlers to determine if a child has any developmental delays or disabilities. The EI Program had a significant increase in the FY24 budget ($40 million) to increase provider rates by 10% and accommodate growing caseloads. Early Intervention advocates are seeking a $40 million increase in FY25 and another rate increase to, in part, address what they say is a shrinking workforce.

Asylum Seekers
Since 2022, Chicago has seen more than 36,000 asylum seekers arrive from Texas.[11] Last November, Governor Pritzker announced the state would provide $160 million in resettlement services. The Governor’s office has stated that this amount is on top of $478 million in state funding provided in fiscal years 2023 and 2024 for shelter, food, medical care, rental assistance, and casework services.[12]

The proposed FY25 budget contains an additional $49.4 million in General Funds (for a total of $139.4 million), and an additional $1.3 million in funds from the federal American Rescue Plan, for Welcoming Centers (essentially one-stop centers to coordinate human services for immigrants and refugees). Although, there is a $10 million decrease in funding for the centers from the DHS State Projects Fund.

According to a Department budget presentation, $67.3 million of the $250.3 million line item appropriation for Home Illinois (a state program coordinating homeless prevention services) will go to support housing needs for new arrivals. The proposed Home Illinois budget is $50 million higher than the FY24 appropriation. Of that $50 million increase, $13 million is designated to implement recommendations of the Racial Equity Roundtable designed examine the root causes of housing insecurity for Black Illinoisans.[13]

Source: Illinois Department of Human Services Budget Briefing 2-21-24

Proposed FY25 funding for a number of other programs serving youth (such as the Youth Employment Program, Redeploy Illinois, Homeless Youth Services, and After School Youth Programs) is level compared to FY24.

Department of Children and Family Services

Within the proposed DCFS budget is funding (both as a FY24 supplemental request and FY25 proposed appropriations) to hire an additional 392 individuals to help with DCFS caseloads. For three decades, DCFS has been under a consent decree to ensure the Department provided adequate services to youth, that children are placed in the most family like setting possible, and that (under the last amendment to the decree) the agency maintain enough staff to so there is a maximum of 10 cases per child abuse and neglect investigator. Data from the Department itself shows the number of investigations has increased by more than 15,000 since FY20 and is projected to continue to increase in FY25.

The Department budget also:

  • Increases funding by $38.9 million for its Comprehensive Child Welfare Information System designed to provide a unified case management system for all DCFS child welfare data and allow for faster case processing,
  • Provides $4.3 million to acquire body cameras and weapons detection equipment designed to help protect DCFS workers[14],
  • Includes $5.8 million to enhance security for private sector providers, and
  • Increases the Foster Homes line item by $19 million to help unlicensed relative caregivers become licensed caregivers.

Along with the proposed FY25 General Funds Operations Budget, the Governor has also proposed a separate capital program. This program contains $100 million for capital grants to providers to increase capacity for youth placement in the most clinically appropriate setting.

Department of Healthcare and Family Services

The largest portion of the HFS budget is for medical assistance ($26.8 billion for FY25 – which represents a $14.2 million increase). What is often not recognized is that the state provides medical assistance to 1.5 million of the state’s 2.7 million children.

Health Care for Non-Medicaid Eligible Residents
For a number of years, Illinois has covered health care for undocumented residents up to 18 years old under its All-Kids insurance program. In 2020, the state began a program to cover undocumented seniors and then expanded it to cover individuals 42-64 years old. At the beginning of 2023, the Governor’s office projected the cost of the program would be around $220 million. Several months later, the administration put operation of the program at $1.1 billion. In the end, the legislature appropriated $550 million and gave the administration authority to halt or cap enrollment in the program. The state capped enrollment for the program serving seniors at 16,500 and on July 1, 2023, halted enrollment in the other program.

The proposed FY25 budget contains $629 million for the Health Benefits for Immigrant Seniors and Health Benefits for Immigrant Adults programs (for individuals  aged 42 or older who do not qualify for Medicaid due to immigration status) of which $440 million is GRF and $189 million other revenue sources.

Medical Debt Relief
The HFS budget also includes $10 million to purchase private medical debt of Illinois residents from debt collection agencies at a significant discount with the intention to then have those debts forgiven. The administration believes the measure will potentially provide $1 billion in medical debt relief for at least 300,000 low-income residents.

HFS is now required to pass through all child support to families receiving Temporary Assistance for Needy Families. The proposed FY25 budget includes an increase of $20.6 million in General Funds to address this provision.

Department of Public Health

The Department’s budget includes $4 million in new state funding to address maternal health disparities. According to DPH, Black Illinois women are twice as likely to die from any pregnancy-related condition and three times as likely to die from pregnancy-related medical conditions as white Illinois women.[15] Of the $4 million, the Governor’s budget indicates $2.5 million will go to the creation of an action plan that includes a reproductive health care asset inventory focused on community-based providers and $1.5 million will go to birth equity resource grants that include covering costs associated with opening community based birth centers.

What’s Not in the Budget or Wasn’t Mentioned in the Budget Address
While advocates for different causes may see additional funding for some of the items noted in this post, the budget does not directly address two large looming fiscal issues.

  • As noted earlier, the Chicago Public Schools project a $391 million budget shortfall as it spends down remaining COVID-relief dollars it has received.
  • The Chicago region’s transportation system is facing a potential $730 million shortfall in 2025 as federal COVID-related funding expires.[16] The Chicago Metropolitan Agency for Planning has looked at potential revenue options:

Source: Chicago Metropolitan Agency for Planning

In addition to providing needed economic resources to working families, a more robust state Child Tax Credit than what the Governor proposed would also help make a very regressive state and local tax system (where the lowest income households pay more than twice of their income in taxes than the top 1% of income households) more progressive. When you factor in median household incomes by race and ethnicity, the tax system tax system that puts a greater burden, on average, on Black and Latinx households than white/non-Latinx households. Only a state constitutional amendment would allow the state to provide different individual income tax rates by income.

Combined with future funding that would be needed to maintain the pledged funding for the Evidence-Based Funding formula for Illinois schools plus funding for the planned next two years of Smart Start, Illinois needs to find additional revenue sources beyond what the Governor has proposed as part of this budget.

The legislature’s scheduled adjournment date is May 24th. Whether it is before that date, and before a general election in November, or after those dates, Illinois needs to re-examine both its income tax structure and sales tax structure so that it has adequate revenue to reduce inequities and provide opportunities for every child and his or her family.

Written By John Gordon and Mitch Lifson

 

[1] General Funds represent the General Revenue Fund, the Common School Fund, the Education Assistance Fund, the General Revenue-Common School Special Account Fund, the Fund for the Advancement of Education, the Commitment to Human Services Fund, and the Budget Stabilization Fund. They provide the greatest flexibility in terms of appropriations by lawmakers. There are specific state and federal funds that by law can only be used for only specific purposes (i.e. federal highway funds). When added together, the proposed operations for FY25 total $123.3 billion. There is also a separate capital budget.

[2] According to the Governor’s Office of Management and Budget, available FY24 revenue was higher than the estimate in the approved FY24 budget due to a “a larger than anticipated transfer in from the Income Tax Refund Fund, higher returns on investment income, and a retroactive draw of federal Medicaid matching dollars”. (From Proposed FY25 Budget)

[3] https://www.avalara.com/blog/en/north-america/2021/10/vendor-discounts-for-filing-sales-tax-on-time.html

[4] https://www.covers.com/industry/illinois-tax-hike-sports-betting-effects-smaller-february-2024

[5] https://www.cbpp.org/12-states-impose-sales-tax-on-groceries

[6] https://gov.illinois.gov/news/press-release.29519.html

[7] https://www.chalkbeat.org/chicago/2024/01/25/illinois-education-budget-proposal-is-less-than-what-advocates-want/

[8] Illinois Student Assistance Commission: Basic ISAC Program Data 2023

[9] Illinois State Board of Education: Evidence-Based Funding Distribution Calculator; ISBE State Report Card.

[10] https://www.ilgateways.com/docman-docs/smart-start/3555-smart-start-faq/file

[11] City of Chicago Figures as of 2/29/24: https://www.chicago.gov/city/en/sites/texas-new-arrivals/home/Dashboard.html

[12] https://gov.illinois.gov/news/press-release.29453.html

[13] The Racial Equity Roundtable on Black Homelessness convened in February 2023. The University of Illinois at Chicago, Institute for Research on Race & Public Policy completed a qualitative and quantitative analysis on the Black-White disparities in homelessness. A release of a report on the work was expected in February 2024. (Home Illinois 2023 Annual Report)

[14] In 2022, a child protection specialist with the Department of Children and Family Services was stabbed to death while performing a home visit.

[15] https://dph.illinois.gov/resource-center/news/2023/october/idph-releases-third-edition-of-maternal-morbidity-and-mortality-.html

[16] https://www.cmap.illinois.gov/documents/10180/1523087/Plan+of+Action+for+Regional+Transit_Dec2023.pdf/6d674674-ccb4-0bcf-4907-7d7d389bb650?t=1701802264175

Economic Supports and Child Maltreatment

Across the country in Federal Fiscal Year 2021, there were 588,229 victims of child neglect and abuse based on reports from states, the District of Columbia, and the Commonwealth of Puerto Rico. That averages to a victimization rate of 8.1 per 1,000 children.[1] Of the close to 600,000 reports of child maltreatment three-quarters (76%) were cases of neglect compared to 16% that were physical abuse and 10% which were cases of sexual abuse.[2]

Young children continue to be a greatest risk of abuse or neglect. [3]

There are also sharp racial differences in the reported cases of maltreatment. Overall, the victimization rate is highest for American-Indian or Alaska Native children (15.2 per 1,000 children) followed by African-American children (13.1 per 1,000). The victimization rate for Hispanics was 7.7 per 1,000 and for whites 7.1 per 1,000. That said, the victimization rates listed in a 2023 report from the U.S. Department of Health and Human Services regarding Illinois children by race and ethnicity are[4]:

  • 27.4 per 1,000 for Black children,
  • 10.1 per 1,000 for Hispanic children and
  • 10.9 per 1,000 for white children

In many cases of neglect, poverty is a significant factor. In fact, a number of academic studies have documented that the social determinants of health that include poverty, parental educational attainment, housing instability, food insecurity, and uninsurance are associated with child maltreatment.[5] Furthermore, as adults, maltreated children are at increased risk for behavioral, physical and mental health problems that include depression, obesity, high-risk sexual behaviors, and alcohol and drug misuse. [6]
________________________________________________________________________________________________________________

Poverty versus Child Neglect:

Much of the data cited here is based on state reports of child abuse and neglect. Neglect is based on state and federal definitions.

The CDC use the following definition of child maltreatment as:
Any act or series of acts of commission (physical abuse, sexual abuse, psychological abuse) or omission (physical neglect, emotional neglect, medical/dental neglect, educational neglect, inadequate supervision, exposure to violent environments) by a parent or other caregiver that results in harm, potential for harm, or threat of harm to a child.

Child Maltreatment Surveillance, Uniform Definitions for Public Health and Recommended Data Elements, Centers for Disease Control and Prevention, January 2008

However, a pair of former federal officials also note:
“Poverty is a risk factor for neglect, but poverty does not equate to neglect. The presence of poverty alone does not mean a child is unsafe, unloved, or that a parent lacks the capacity to care for his or her child.”

Jerry Milner, Former Associate Commissioner of the Children’s Bureau, U.S. Department of Health and Human Services David Kelly, Special Assistant to the Associate Commissioner

Milner, J. & Kelly, D. (December 2019/January 2020). It’s time to stop confusing poverty with neglect.; Children’s Bureau Express, 2010).
___________________________________________________________________________________________________________________

Given the impact of poverty, one cannot ignore the tremendous impact the 2021 enhanced federal child tax credit had in reducing poverty. The enhanced credit not only increased the maximum credit level from $2,000 per child to $3,600 for children under the age of six and $3,000 for children ages 6-17 but it also made the full value of the credit available to more low-income families. It had a dramatic impact on children and families. The U.S. Census Bureau estimates the 2021 expansion of the federal Child Tax Credit lifted 2.1 million children out of poverty.[7] The Census Bureau arrived at this estimate using the Supplemental Poverty Measure.[8]

Unfortunately, Congress authorized this significant anti-poverty measure for only one year (2021) during the height of the pandemic. Since then, with the credit falling back to $2,000, it has not been able to agree on an increase in the credit. The impact of the inaction is significant. Census figures show that, based on the SPM, child poverty increased nationally from 5.2% in 2021 to 12.4% in 2022.[9]

The Census Bureau has not yet released the latest state SPM figures. However, the state supplemental poverty measurement rate from the census bureau went from 12.7% in 2019 for children under age 18 to 5.5% in 2021 (a reduction of 56.7%).[10] It is expected that when the Bureau releases the state 2022 rates later this year, the number will show an increase similar to the national figure.

The Census Bureau numbers out on the official child poverty rates in 2022 show that the child poverty rate for Black Illinois children is four times that of white/non-Latinx Illinois children (9.0% vs 36.1%) and the child poverty rate for Latinx children (18.7%) is more than twice the rate for white/non-Latinx children.[11] Thus, with markedly higher poverty rates, the current rates of maltreatment by race, and poverty being a significant factor in child maltreatment, it would appear Black children are at a higher risk of child maltreatment.

The numbers show the impact additional economic supports such as the Child Tax Credit and the Earned Income Tax Credit can have on reducing poverty and a number of studies point to the correlation between reducing child maltreatment by reducing poverty.  The reasons may vary. As a report on economic supports and child well-being from Chapin Hall at the University of Chicago notes, financial supports may reduce parental stress. [12]

Here are just a few of the studies examining the impact of additional economic supports on child maltreatments:

  • With the enhanced federal child tax credit, the federal government also advanced half the credit to taxpayers in monthly payments. An examination of data from Georgia hospitals shows the advance payments were associated with fewer child abuse and neglect related emergency department visits.[13]
  • Modeling of the Earned Income Tax Credit shows a 10% increase in state EITC benefits was associated with 241 fewer reports of neglect per 100,000 children.[14]
  • A refundable EITC was associated with a decrease of 3.1 abusive head trauma admissions per 100,000 population in children aged <2.[15]
  • A refundable state EITC was associated with an 11% decrease in foster care entries compared to states without a state-level EITC after controlling for child poverty rates, racial/ethnic composition, education and unemployment. [16]
  • An examination of Temporary Assistance for Needy Families data from 2001 to 2010 found that increases in maximum allowable TANF cash benefits and greater access to TANF benefits decreased mothers’ self-reports of physical maltreatment.[17]

In its review of state policy options to increase access to economic supports as a child welfare prevention strategy, Chapin Hall lists a number of recommendations that include:

  • Establishing a refundable state level Child Tax Credit,
  • Establishing a refundable state-level Earned Income Tax Credit (not only increasing the level of the credit but also implementing measures to increase EITC uptake such as supplied fax filing),
  • Increasing the state minimum wage (currently $14 per hour and slated to go $15 next year),
  • Implementing paid family leave and
  • Better leveraging funding opportunities to support well-paying , stable employment – including redesigned TANF work programs.

Other measures cover child care, housing, medical care, the Supplemental Nutrition and Assistance Program and the Women Infants and Children (WIC) Program.

Illinois currently has a state EITC (worth, in Tax Year 2024, 20% of a taxpayer’s claimed federal EITC) but could take a major step forward with the establishment of a state Child Tax Credit. Fourteen other states now have some form of a state Child Tax Credit.[18] As the research cited here indicates, a child tax credit can not only provide greater economic security to working families but potentially reduce family stressors and in the process reduce the number of child maltreatment cases.

Written by Tim Franklin and Mitch Lifson.

[1] U.S. Department of Health & Human Services, Administration for Children and Families, Administration on Children, Youth and Families, Children’s Bureau. (2023). Child Maltreatment 2021. Available from https://www.acf.hhs.gov/cb/data-research/child-maltreatment.

[2] https://www.childrensdefense.org/the-state-of-americas-children/soac-2023-child-welfare/

[3] Annie E. Casey Foundation, Child Maltreatment Trends: A Persistent Picture of Young Survivors and Neglect, August 9, 2023, https://www.aecf.org/blog/child-maltreatment-trends

[4] U.S. Department of Health & Human Services, Child Maltreatment 2021, (2023).

[5] Hunter, Amy and Flores, Glenn, “Social determinants of health and child maltreatment: a systematic review, Pediatric Research, 89-269-274, 2021.

[6] World Health Organization, Child maltreatment, September 12, 2022; https://www.who.int/news-room/fact-sheets/detail/child-maltreatment

[7] https://www.census.gov/content/dam/Census/library/working-papers/2022/demo/sehsd-wp2022-24.pdf

[8] Unlike the U.S. Census Bureau’s Official Poverty Measure, the SPM takes into account expenditures for food, clothing shelter, and child care (among other areas) as well as income from tax credits and other sources such housing subsidies, the Supplemental Nutrition Assistance Program, and the nutrition program under the Women, Infants, and Children (WIC) Program.

[9] https://www.census.gov/library/publications/2023/demo/p60-280.html

[10] U.S. Census Bureau, Supplemental Poverty Estimate using American Community Survey Public Use Data

[11] U.S. Census Bureau, 1-Year American Community Survey Data, 2022.

[12] Weiner, D.A, Anderson, C. and Thomas, K. (2021). System transformation to support child and family well-being: The central role of economic and concrete supports. Chicago, IL: Chapin Hall at the University of Chicago

[13] Bullinger, Lindsey Rose, and Boy, Angela. (2023). Association of Expanded Child Tax Credit Payments With Child Abuse and Neglect Emergency Department Visits. JAMA Network Open. 2023;6(2):e2255639

[14] Kovski NL, Hill HD, Mooney SJ, Rivara FP, Morgan ER, Rowhani-Rahbar A. Association of State-Level Earned Income Tax Credits With Rates of Reported Child Maltreatment, 2004-2017. Child Maltreat. 2022 Aug;27(3):325-333.

[15] Klevens J, Schmidt B, Luo F, Xu L, Ports KA, Lee RD. Effect of the Earned Income Tax Credit on Hospital Admissions for Pediatric Abusive Head Trauma, 1995-2013. Public Health Rep. 2017 Jul/Aug;132(4):505-511.

[16] Rostad, W. L., Ports, K. A., Tang, S., & Klevens, J. (2020). Reducing the Number of Children Entering Foster Care: Effects of State Earned Income Tax Credits. Child Maltreatment, 25(4), 393-397.

[17] Spencer RA, Livingston MD, Komro KA, Sroczynski N, Rentmeester ST, Woods-Jaeger B. Association between Temporary Assistance for Needy Families (TANF) and child maltreatment among a cohort of fragile families. Child Abuse Negl. 2021 Oct;120:105186.

[18] In 2023, Arizona had a one-time tax rebate program in place. Qualifying taxpayers could receive a rebate of $250 per dependent under age 17 and $100 per dependent over age 17 as claimed on their 2021 returns.  The maximum available rebate for taxpayer was $750.

Illinois’ Tax System Widening Inequality

A new report by the Institute on Taxation and Economic Policy (ITEP) shows Illinois has the eighth most regressive state and local tax system in the country. A regressive tax system is one where low- and middle-income families pay a larger share of their incomes in taxes than upper-income families. In Illinois, households with the lowest 20% of incomes (less than $26,700) pay 14.8% of their income in taxes while the top 1% (over $749,400) pay just 7.3% of their income in taxes. The ITEP study documents that Illinois has the second-highest tax rate for the lowest 20% of household incomes. The average effective local and state tax rate in the U.S. for the lowest 20% of household incomes is 11.3%.

A regressive system not only widens economic disparities but has implications with regard to the racial and ethnic wealth gaps. In 2022, white/non-Latinx Illinois households already had a median income that was more than 78% higher than Black Illinois households ($80,404 vs $45,019). The median income level for Latinx Illinois households was $72,139. Consequently, when you factor in the ITEP analysis of tax burdens by income, the state has in place a tax system that puts a greater burden, on average, on Black and Latinx households than white/non-Latinx households.

This also has implications for the well-being of our state’s children where the 2022 child poverty rate for Black Illinois children is four times that of white/non-Latinx Illinois children (9.0% vs 36.1%) and the child poverty rate for Latinx children (18.7%) is more than twice the rate for white/non-Latinx children.

The ITEP study shows that 41 states tax the top 1% (by income) at a lower rate than any other income group. States with tax systems that reduce inequality are California, Maine, Minnesota, New Jersey, New York, and Vermont.

The majority of states with the ten most regressive tax systems either have no broad-based income tax or a flat-rate personal income tax (such as in Illinois). The Illinois Constitution states:

A tax on or measured by income shall be at a non-graduated rate. At any one time, there may be no more than one such tax imposed by the State for State purposes on individuals and one such tax so imposed on corporations.

In 2020, Illinois voters turned down a proposed change to that section of the state constitution that would have allowed a progressive income tax.

Progressive income tax rates, seen in all the least regressive state and local tax systems, as well as refundable tax credits (where a taxpayer can receive a refund check for the value of any tax credit that exceeds the tax liability of the filer) can help offset the impact of sales, excise, and property taxes, which tend to be regressive. Due to their financial situation, low-income families spend more of their income and save less than higher-income families. As a result, more of their income is subject to sales taxes that are imposed at a flat rate.

The regressive nature of sales taxes is compounded when the taxes apply to essential items for low-income households. While lower than the general tax rate of 6.25%, Illinois taxes groceries at a 1% rate.

According to the Center on Budget and Policy Priorities, Illinois is one of only a dozen states that as of last fall taxed groceries.[1] The state suspended the tax from July 1, 2022, through June 30, 2023, to help families deal with higher grocery prices during a time of high inflation. At a February 4, 2022 press conference touting the proposed tax, Governor J.B. Pritzker stated: The grocery tax is really one of the most regressive taxes, and because we have balanced our budget, and we have a surplus in Illinois, this is a straightforward way for us to help residents who need it most.[2]

Illinois also taxes relatively few services versus tangible items.  A 2017 survey by the Federation of Tax Administrators listed Illinois as taxing 29 services, while Kentucky taxed 40, Wisconsin 82, and Iowa 89.[3]

2021 study by Dartmouth Professor Diego Comin and his colleagues showed that wealthier consumers spend more on services and less on agriculture and manufactured goods.[4] In addition, services contributed 77.6% of the nation’s Gross Domestic Project in 2021.[5] Consequently, it appears that taxing fewer services benefits higher-income households.

In reference to property taxes, Illinois had some of the highest property taxes in the country in 2021.[6] Part of that is the result of the reliance local school districts place on the tax for operating revenue. While Illinois began adding an additional $350 million per year in state funding to the evidence-based school aid formula in 2018, local revenues still made up more than half of the school districts’ total revenue.[7]

Assessment exemptions for general homestead, veterans, the disabled, and seniors help reduce the distribution of the tax burden on some households. The state also allows income tax filers whose income does not exceed $250,000 (individually and $500,000 for married filing jointly), to take a tax credit of 5% of the filer’s property tax bill. However, that same relief is not available to renters – who are disproportionately individuals of color. Frequently, even with the property tax credit, renters pay a portion of the property taxes in their rent payments. A review of housing payments by the National Low-Income Housing Coalition shows that 86.4% of extremely low-income renter households in Illinois (0-30% of the Average Median Income) spend more than 30% of their income on housing.[8]

Remedies:

While changing the state’s personal income tax rates would require a constitutional amendment, state legislators can enact two short-term measures to provide greater economic security to Illinois families.

ITEP reports that all 10 of the states with the most equitable tax systems offer refundable state Earned Income Tax Credits (EITC) and nine of the 10 have refundable Child Tax Credits (CTC). Illinois has a state EITC (valued in Tax Year 2024 at 20% of a taxpayer’s claimed federal EITC) but not a CTC. Children’s Advocates for Change strongly supports the adoption of this measure to help working families deal with the additional costs of raising children. The credit can help low- and moderate-income families with food insecurity, rising rent, dental care, transportation costs, and a host of other needed goods and services. It’s also good for the local economies as credit recipients purchase necessary items for their households.

Another means of assisting with rising rental costs is the adoption of an income tax credit for renters. Statistics from the National Low Income Housing Coalition show that in 2023 Illinois had only 34 affordable and available homes for rent for every 100 households at or below 30% of the Average Median Income level and only 65 affordable and available homes for rent for every 100 households between 31% and 50% of the Average Median Income level.[9] While the state has adopted new incentives in recent years for the construction of affordable housing, a housing credit follows the renter. Consequently, it can assist with paying for rental units closer to employment locations (which also helps reduce transportation costs). It also helps promote greater housing stability. Housing instability can have a significant impact on children as they move from one school district to another.

These steps can be taken in the short term and would provide greater economic security for working families. In the long term, it may be necessary to look at Illinois’ income tax rates as well as the structure of the state’s income tax system. A November 15, 2023 Economic and Fiscal Policy Report from the Governor’s Office of Management and Budget projects -based on current taxes and expenditure patterns – a Fiscal Year 2025 (7/1/24-6/30/25) $721 million General Fund deficit ($891 million after an additional contribution to the Budget Stabilization Fund). That deficit grows through Fiscal Year 2028.[10]

In examining the income tax structure, it is also important to recognize that Illinois does not tax 401(K), retirement, pension, and social security benefits that the federal government taxes. The Fiscal Year 2021 Tax Expenditure Report from the Illinois Comptroller, which documents the value of Illinois tax credits and exemptions, shows that Illinois lost almost $2.9 billion in tax revenue due to these exemptions. Unlike the property tax credit, income is not a determining factor in these exemptions.

In the short and the long term, it is important for Illinois residents and our elected officials to  look at changes to the overall state and local tax system to make it more progressive.  Doing so will make the system more equitable with regards to household income, race, and ethnicity. It will also help ensure that all children and their families thrive.

Written by Mitch Lifson

[1] https://www.cbpp.org/12-states-impose-sales-tax-on-groceries
[2] https://wmbdradio.com/2022/02/04/pritzker-speaks-on-proposed-grocery-sales-tax-suspension-calls-out-republicans/
[3] https://taxadmin.org/state-taxation-of-services-by-category-2017/; 2017 is the last available survey from the FTA. Changes may have occurred since then.
[4] https://home.dartmouth.edu/news/2021/03/new-study-finds-income-not-prices-drives-economy
[5] https://www.statista.com/statistics/270001/distribution-of-gross-domestic-product-gdp-across-economic-sectors-in-the-us/
[6] https://taxfoundation.org/data/all/state/property-taxes-by-state-county-2023/
[7] https://www.nea.org/sites/default/files/2022-06/2022%20Rankings%20and%20Estimates%20Report.pdf
[8] https://nlihc.org/sites/default/files/SHP_IL.pdf
[9] https://nlihc.org/sites/default/files/SHP_IL.pdf
[10] https://budget.illinois.gov/content/dam/soi/en/web/budget/documents/economic-and-fiscal-policy-reports/Economic%20and%20Fiscal%20Policy%20Report%20FY24%20FINAL%2011.15.23.pdf

State Child Tax Credit Activity

State child tax credits, like the federal child tax credit, can have a positive impact on a child’s health, education, and even future earnings. (See prior blog post.)

Illinois House and Senate members introduced legislation this year in the Illinois General Assembly to establish state child tax credits (SB 1444 and HB 3950). The bills, identical, would have created a maximum credit of $700 per child in households with reported income of $75,000 for joint tax filers or $50,000 for other tax filers. Beyond those thresholds, the value of the credit reduces by $24 for each additional $1,000 in income. However,  neither bill made it out of its respective chamber.

Yet, several other states were successful in their efforts to create or expand state child tax credits. To date, 14 states have adopted state child tax credits (some are effective in future years). All but three  of the state credits are refundable, meaning a taxpayer may receive a refund from the state if the value of the credit exceeds the amount the taxpayer owes to the state.

           

Below is a review of the activity seen around the country:

New Credits

Minnesota

The state established a refundable child tax credit with a maximum value of $1,750 for each qualifying child under the age of 18. Effective next year (for payment of 2023 taxes), the maximum credit is available for children in households where joint tax filers make less than $35,000 or less than $29,500 for all other filers.

Oregon

The state established a refundable credit with a maximum value of $1,000 for each qualifying child up to the age of six. Effective next year (for payment of 2023 taxes), the maximum credit is available to households with reported incomes of under $25,000.

Utah

The state established a non-refundable tax credit of $1,000 for each qualifying child aged 1-3. Effective next year (for payment of 2023 taxes), the maximum credit thresholds (after which the credit begins to phase out) are $54,000 for joint tax filers, $43,000 for single or head of household filers, and $27,000 for single filers.

Enhanced Credits

New Mexico

Effective next year (for payment of 2023 taxes), approved legislation increases the state’s child tax credit for the lowest three income levels from $175 to $600, $150 to $400, and $125 to $200. The maximum value credit applies to households reporting income of less than $25,000.

New York

Prior to action this year, the state’s child tax credit was available to children aged 4-17. With this year’s action by the state, the credit will now include children under the age of 4. Eligibility thresholds are $110,000 for joint tax filers, $75,000 for single filers, and $55,000 if married filing separately. The value of the credit is the greater of 33% of the portion of the taxpayer’s federal child tax credit or additional child tax credit attributable to qualifying children or $100 multiplied by the number of qualifying children.

New Jersey

The state doubled the value of its refundable child tax credit to $1,000. The credit applies to children five or younger. The maximum credit value is available to households with reported income of $30,000 or less.

Maryland

Previously the state’s $500 child tax credit was available to taxpayers making $6,000 or less with children under 17 with a disability. The state has now expanded availability to individuals making $15,000 or less and for children under the age of six.

One-Time Rebate

Arizona Governor Katie Hobbs signed a new one-time Child Tax Rebate that provides eligible families $250 per child up to three dependents.

 

 

Sources for post: Center on Budget and Policy Priorities, Institute on Taxation and Economic Policy, Tax Credits for Working Families, The Rockefeller Foundation and various news media reports.
https://www.cbpp.org/blog/momentum-for-new-and-expanded-state-child-tax-credits-earned-income-tax-credits-continued-in
https://itep.org/refundable-credits-winning-policy-choice-2023-child-tax-credit-eitc/
https://www.taxcreditsforworkersandfamilies.org/state/utah/
https://www.rockefellerfoundation.org/blog/a-wave-of-child-tax-credits-is-building-in-the-states/
https://newjerseymonitor.com/briefs/budget-panels-approve-child-tax-credit-expansion/
https://tax.thomsonreuters.com/news/new-mexico-governor-approves-rebates-and-certain-tax-cuts/
https://www.niskanencenter.org/new-mexico-child-tax-credit-expansion-needs-simplification/
https://www.silive.com/news/2023/04/2023-stimulus-update-ny-child-tax-credit-will-be-expanded.html
https://www.kiplinger.com/taxes/minnesota-rebate-checks-and-child-tax-credit

 

 

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